Hollywood faces recurring Net nightmare

Taiwan-based Movie88.com, which sold access to thousands of films for $1 each, went dark in mid-February after a powerful motion picture lobbying group worked with the local government to pull its plug. The site, which offered movies owned by the major studios without their authorization, was deemed to be infringing on their copyrights.

Now, Film88.com has sprung up in its place, with an uncannily similar formula for renting and streaming films over the Internet. However, the site is a new venture based in Tehran, Iran--a country that broke off diplomatic relations with the United States more than two decades ago and that does not protect foreign copyrights.

"Movie88 is dead," Hail Hami, Film88's operator, wrote in an e-mail interview with CNET News.com. "We recruited some staff and a lot of ideas from Movie88. But we feel that we are better than Movie88. We have streams at 500k and are more user friendly."

Film88 is a kind of sequel to Hollywood's real-life horror story, in which Internet thieves trade and own access to content without ever paying for it.

Fighting back against rogue operators, the Motion Picture Association of America (MPAA), which represents the seven major movie studios including Walt Disney and Sony Pictures Entertainment, has launched a massive strike at Net bandits of all sizes that violate its members' copyrights. So far, the MPAA has had success defusing projects such as iCraveTV.com, an Internet TV service launched in Canada, and Web VCR service RecordTV.com. But as services crop up in countries that do not recognize U.S. copyrights, anti-piracy fighters may have an increasingly difficult time nailing down these elusive threats.

The Taiwanese authorities shut down Movie88 through its Internet service provider under international provisions in the U.S. Digital Millennium Copyright Act.

American interests are unlikely to find such a receptive ear in Iran. The two countries broke off diplomatic relations after Iranian students overran the U.S. Embassy in Tehran on Nov. 4, 1979, and held 52 Americans hostage for 444 days--an incident that helped Ronald Reagan defeat Jimmy Carter in the 1980 U.S. presidential race.

Since then, relations between the countries have remained hostile--a stance that intensified after suicide hijackers destroyed the World Trade Center on Sept. 11, killing more than 3,000 people. In his State of the Union address following the attack, President George W. Bush named Iran as part of an international terrorist "axis of evil," along with Iraq and North Korea.

"This is part of a continuing trend where we'll see more and more file-sharing services pop up in countries where intellectual property is difficult to protect," said PJ McNealy, research director for GartnerG2, a division of research firm Gartner. "The IP laws aren't as advanced or stringent in other countries" as they are in the United States.

Video store on the Web
Film88 runs on a video-store model, letting people "rent" movies for three days in return for a payment of $1 to $1.50. The movies cannot be saved to a hard drive or downloaded. It offers a range of top releases including "The Scorpion King" and "Star Wars." But the film archive lacks popular features such as "American Beauty" and "Lord of the Rings."

Viewers are limited to watching movies in a small box on their computer screens, using RealNetworks' RealOne media player. Video accessed in a test was sharp, although there were some glitches. Viewers can pause, fast-forward and rewind movies, although resuming play took several minutes as the movie caught up.

Film88's Hami said the site does not have many users because it has just launched. According to registration records on VeriSign, which runs the .com top-level domain, the site was registered April 18.

Hami said the company is working out a reasonable percentage of film rentals, between 25 percent and 30 percent, to pay the copyright owners in the Unites States and elsewhere.

"We are still working on the fair percentage," he said. "The Internet economy is very different, and if we price our rental more than $1, there may not be good response. So, we are going for volume."

Sites such as Film88 could undermine Hollywood's own Internet distribution plans, which have been taking shape slowly. Consumers can buy and rent movies over the Internet for viewing on a computer from a handful of legal commercial services, including Intertainer and CinemaNow. But for now, the major studios are focusing on cable and satellite services linked to television, rather than Internet services, to distribute their products.

Video-on-demand services with support from the top film distributors, such as MovieLink, are expected to introduce services later this year. But those efforts have run into difficulties. Regulators have been looking into the studios' planned Internet distribution partnerships, and News Corp.'s 20th Century Fox studio earlier this year pulled out of a joint venture with Walt Disney to create a video-on-demand service dubbed Movies.com.

Copyright owners could seek to have the Film88 Web site shut down by asking the domain registrar--U.S.-based VeriSign--to deactivate the address. But that solution would only offer a stopgap with no guarantee that the service would be kept off the Web permanently.

In the event the domain-name registrar is served with legal papers to remove a site, it will comply, said VeriSign spokesman Brian O'Shaughnessy. But if a domain name is yanked, the site simply has to sign up for another one under a different registrar. This is typically the incentive for copyright holders to try to shut down the site at its source, the Web host.

Hami said Film88 has learned from copyright experts that Iran does not protect foreign copyrights. Nevertheless, the company plans to abide by U.S. laws, he said.

"This is a new market for copyright owners which has not been fully exploited," he said. "This market is also not in competition with the conventional way of watching a movie in the cinema. We are not pirates, but a technology innovator trying to balance between innovation and copyright compensation."

The MPAA's international counterpart, the Motion Picture Association (MPA) said it plans to stop illegal activity on Film88 but did not specify the actions it would take.

"The MPA is aware that an Internet site called 'Film88.com' is offering to stream Hollywood movies to users for a fee. To the extent that the site infringes the copyright of any MPA member company, the MPA intends to take swift and immediate action to stop the illegal activity," the trade group said. "While the site claims to be located in areas outside the United States, the MPA has several legal options available prevent the site from distributing films without authorization of the copyright owner."